Loaded with technical innovations, Toyota's Lexus sets the luxury-auto trade on its rear bumper, a sobering portent of the Japanese industry's prowess

At first, it sounded like a major marketing disaster in the making. Last December, only three months after the highly touted Lexus LS400 luxury sedan had been introduced in the U.S., Toyota announced the recall of all 8,000 cars it had sold at that point. The news sent a shudder through Lexus' spanking new North American dealership network. "My first reaction was, 'Oh, my God, here comes trouble," ' says Ken Meade, owner of Lexus of Lakeside in suburban Detroit.

What happened next, however, might be called Zen and the Art of Automobile Maintenance. Toyota had taken its sweeping action on...